Thursday, December 16, 2010

RUSSIA MOVES TO SECURE TANZANIA URANIUM RESERVES

RUSSIA'S state atomic energy corporation, Rosatom, has moved on ASX-listed Tanzanian uranium developer Mantra Resources with an agreed $1.16 billion takeover bid as part of its drive to double in size.

The $8-a-share bid by Rosatom's mining arm, ARMZ, comes as the world's big nuclear groups seek to secure uranium reserves in support of their nuclear power station building programs for their own countries, as well as for countries that do not have the expertise.

Mantra shares closed 34¢ higher at $7.92. While the market speculated on the potential for the Russians to get some competition from Chinese, Japanese or European nuclear groups, Mantra's share price indicated the ARMZ offer was fully priced. Advertisement: Story continues below

The offer represents an effective $US10.26 a pound for the uranium resource that Mantra has outlined at its flagship Mkuju River uranium property in southern Tanzania. That compares with the average of $US12 a pound investors have been paying for established uranium producers but is up substantially on the $US2 a pound average being paid for explorers and would-be developers like Mantra.

Mantra's major shareholder, with a 13.5 per cent shareholding, Highland Park, intends to accept the bid, in the absence of a higher offer emerging. The bid is subject to clearance from the Australian Foreign Investment Review Board. But given Mantra's African focus, that is not expected to be an issue. Mantra is also about 27 per cent on the Canadian market.

ARMZ has a presence in Australia through its majority ownership of Canada's Uranium One, which owns a 51 per cent stake in the $138 million Honeymoon uranium project in South Australia, a joint venture with Japan's Mitsui & Co.

Mantra chief executive Peter Breese said the offer from ARMZ was a compelling ''clean, all-cash offer''. He said that the premium to Mantra's pre-bid market price (21 per cent on the 30-day average) reflected the ''strategic significance'' of Mkuju River as well the ''current status of the project against the backdrop of a recent spike in the uranium price''.

Uranium prices have risen from $US40 a pound to $US60 a pound as China has bought heavily before commissioning new nuclear power stations.